The Cambridge, Massachusetts-based services and consulting firm's quarterly profit increased 53 percent to $16.3 million, or 26 cents a share. That compares to $10.6 million, or 17 cents a share, for the same period in 1997, excluding business charges.
Results beat Wall Street expectations by a penny, according to First Call.
Cambridge CEO Jim Sims said the fast-growing company's enterprise-wide reorganization has put the firm back on track.
"There's been a lot of discussion around Cambridge as to how we position the firm after eight years of growth," he said during a conference call held today to announce results. "The past six months have been the most difficult and challenging, but [have also been] most encouraging for us as a firm."
For the quarter ended December 31, 1998, Cambridge posted net revenues of $160.2 million, up 24 percent from $128.8 million a year ago.
For the year, Cambridge posted profits of $57.7 million, or 92 cents a share, on $612 million in revenue. That compares to $38.5 million, or 63 cents a share in 1997, excluding business costs. Including costs, the company said 1998 profits reached $51.9 million, or 83 cents a share.
Costs included an $8.4 million charge for the acquisition of Excell Data last August, and $4.8 million for the acquisition of Peter Chadwick Holdings in 1997.
Over the past nine years, Cambridge has grown at a compound annual rate of 80 percent, to $612 million in annual revenue from $9 million in its founding year.
However, as the firm grew, Sims said that Cambridge failed to respond quickly enough to the market and was hit hard by competition from both smaller firms that battle with Cambridge within particular service lines, and larger companies that snag business by building customer relationships and providing a full suite of services.
Through restructuring, the company has better positioned itself by moving away from selling services from 53 geographically dispersed offices, where offerings were managed separately, to a suite of seven standard service lines offered globally, Sims said.
The company's stock has been creeping back slowly since Cambridge announced restructuring and posted its third-quarter results, which caused share value to plummet. A warning last September that Cambridge would not meet 50-percent growth expectations sent the stock diving to a low for the year of $27.37. The company said profits were hit hard by customers who were delaying IT projects while tackling Year 2000 problems.
Those delays improved somewhat during the fourth quarter, Sims said. However, Cambridge has also responded to the sales slowdown by shifting its focus to emerging markets, Sims said.
That means moving services away from human resources, financial, and manufacturing, which has suffered from an overall license revenue slowdown, toward targeting the growing market for supply chain management, self-service for human resources, and other areas, Sims said.
"The trick throughout this year is to make sure you rapidly reposition yourself around what is happening with Asia Pacific or the Year 2000," Sims said.